SG loophole to be closed 6 months earlier following extensive lobbying

The Treasury Laws Amendment (2019 Tax Integrity and Other Measures No. 1) Bill 2019 was approved by Parliament last week, introducing a number of changes impacting businesses and individuals.

Among them is a measure that ensures an individual’s salary sacrifice contributions can no longer be used to reduce an employer’s minimum superannuation guarantee (SG) contributions.

IPA chief executive officer Andrew Conway said that this integrity measure has been “a long time coming”. In 2017, there was a bill to fix this anomaly, but it lapsed before the election.

“The loophole came about where an employee salary sacrifices into his or her superannuation and the employer uses that contribution to form part of the employer’s obligation to pay the 9.5 per cent SG,” Mr Conway said.

“The loophole will now be closed.”

The IPA advocated for the measure to be brought forward from its proposed date of 1 July 2020 to the start of this financial year, namely 1 July 2019. 

“Employers have had enough warning of the government’s intention to stop this unscrupulous behaviour. We are pleased that the Senate agreed with our position and recommended the measure to be brought forward to 1 January 2020,” Mr Conway said.

“When someone undertakes a salary sacrifice into superannuation, they are attempting to provide sufficient savings to live more comfortably when they retire. They are sacrificing spending money today to build their nest egg, which is a good thing as it means less reliance on government support in retirement.

“Therefore, this measure is important to ensure individuals’ investments for their future are protected. It’s ironic that while we are discussing an SG increase to 12 per cent, some employees may not have been receiving the current 9.5 per cent while the loophole has been exploited.”